SK's US battery arm sells $1 bn green bonds at lower rates

The $1 billion green bond sale by SK Battery America Inc., a US unit of South Korea’s SK Innovation Co., was nine times oversubscribed at $9 billion by foreign investors during its Jan. 19 bookbuilding, leading to a cut in the company's borrowing rates.

The proceeds will be used to build an electric vehicle battery production line already under construction in the state of Georgia, according to investment banking sources. The plant, with an annual capacity of 21.5 gigawatt hours (Gwh), is estimated to cost around 3 trillion won ($2.7 billion).

SK Battery split the issue to $300 million in a three-year tranche and $700 million in a five-year tranche. The three-year notes were over 10 times overbid at $3.75 billion, with the five-year paper drawing $5.25 billion in subscriptions.

Bank of America, Citigroup Global Market, Credit Agricole, BNP Paribas and HSBC handled the issues.

Green bonds, a type of environmental, social and governance (ESG) bond, are issued to fund eco-friendly projects such as those involving renewable energy or electric vehicles.

The stronger-than-expected demand for the green bonds pulled their coupon rates lower than initially estimated. The three-year notes were sold at an annual rate of 1.703% and the five-year bonds at 2.198% per annum.

The rechargeable battery’s upbeat business outlook was attributed to heavy demand for the new issues, despite their relatively low credit rating of triple B minus, the lowest of the 10 investment grade ratings. Its parent company SK Innovation provided a payment guarantee on the new debt.

SK Battery America was established as a US production base for EV batteries. SK Innovation ranked fifth with a 5.5% share in the global EV battery market last year, according to SNE Research, moving up from ninth in 2019. Hyundai Motor, Volkswagen and Ford Motor Co. are among its clients.

Automaker Kia Corp. is also planning to issue green bonds as part of the planned $500 million global bond sale to raise money for future mobility investment such as in electric and hydrogen-fueled vehicles.

In South Korea, Hyundai Steel Co.’s green bond sale was more than eight times oversubscribed, drawing around 2 trillion won in subscriptions.

Write to Jin-Sung Kim at jskim1028@hankyung.com
Yeonhee Kim edited this article.